Weekly Briefing

Having it both ways?

WB-11062013

McCrory administration can’t get its story straight when it comes to the impact of federal spending in NC

No one is ever going to accuse North Carolina Governor Pat McCrory of being a policy wonk. Of course at some level, that’s okay; he has never really pretended to be one.

Unlike, predecessors like Jim Martin (a scientist), Jim Hunt (a successful farmer and attorney) or even, to a lesser extent, state government veterans like Mike Easley and Bev Perdue, McCrory clearly doesn’t immerse himself in the details of policy. Sales are more clearly his strong suit. This fact was made plain this past July when the Governor announced his intention to sign an omnibus voting law rewrite at the same time that he admitted he had not read the bill and was unfamiliar with an important and highly controversial provision.

Still, at some point, it’s important even for good salespeople to at least grasp the essence of the products or services they are peddling and, at a minimum, avoid blatantly talking out of both sides of their mouths.

This brings us to two contradictory stances the McCrory administration has taken of late on an extremely important issue for any state government – namely, the state’s relationship with the federal government and the relative benefits of federal expenditures at the state level. As we’ll see, when it comes to Medicaid and health care, the McCrory administration and its allies reject federal dollars as unreliable and “borrowed” and a threat to the state’s fiscal health. When it comes to other infusions of federal money however – most notably of late, military spending – the administration is only too happy to welcome the cash and tout it as a key to the health of the state’s economy. Indeed, the administration has even gone so far as to rely upon an economic model in the latter case that it rejects when it comes to Medicaid.

Rejecting Medicaid expansion

Under the Affordable Care Act, states have been empowered (encouraged, really) to expand their Medicaid rolls dramatically. In North Carolina the state has been given the option of adding roughly 500,000 needy individuals to its Medicaid program. What’s more, the cost of covering these new enrollees would be borne almost entirely by the federal government. The ACA specifies that the federal government would pay 100% of the cost of coverage for the first three years and a minimum of 90% after that.

The practical impact of such an enormous influx of federal dollars into the state’s economy as the result of Medicaid expansion would be, not surprisingly, enormous. Earlier this year, analysts at Regional Economic Models Inc. (REMI) even provided the state with an estimate of how much it stood to gain. According to the report (A contrast: Modeling the macroeconomic impact of ‘Medicaid expansion’ in North Carolina”):

“…the Medicaid expansion had potential to be a positive for North Carolina and its economy from 2014 to 2021. Total employment increased by around 23,000 jobs, private employment increased by a similar number, annual GDP was about $1.4 billion higher, and annual real disposable personal income was around $1.0 billion higher.”

REMI developed these findings through the application of a complex economic modeling system that it calls its “PI+” model that it described in the report as follows:

The PI+ model is the “core” of REMI capabilities….The research behind the REMI PI+ model appeared in peer-reviewed journals, and REMI used the federal statistical agencies as data sources when building the software. Data came from the Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), the U.S. Census Bureau, and the Energy Information Administration (EIA).

The REMI logic has, of course, been accepted by political leaders of both parties all over the country. Even arch-conservative governors like Ohio’s John Kasich, Arizona’s Jan Brewer and Florida’s Rick Scott have conceded the undeniable benefits to their states of expanding Medicaid.

Unfortunately, of course, the McCrory administration has been having none of the REMI findings. According to the Governor, expansion of Medicaid would be a disaster for the state. Just last week, the Governor responded to calls for a special session to expand Medicaid by issuing a scathing (and nonsensical) statement in which he said:

I will not sacrifice quality care for the people truly in need, nor risk further budget overruns by expanding an already broken system. Calling a special session to further expand Obamacare in North Carolina is out of the question.”

Meanwhile, the Governor’s conservative allies (including John Hood of the John Locke Foundation whose organization is largely funded by McCrory’s budget director, Art Pope) have explicitly attacked the REMI findings. Hood, who has long had a close relationship with Pope, wrote in March that “the McCrory administration know[s] that these claims aren’t correct.”

Numerous conservative state lawmakers have also made the same argument. During the debate in the General Assembly last winter, Rep. Justin Burr called the REMI claims “hogwash” and Rep. John Blust claimed that all of the money used for expansion would be “borrowed” and thereby be placed in jeopardy by congressional debt-reduction deals.

A different tune when it comes to military spending

With the lengthy and acrimonious debate over Medicaid as background, it was all the more remarkable yesterday to see the Governor’s office issue a press release touting a new report by the state Commerce Department that celebrates the myriad benefits to the state and its economy that result from the receipt of, you guessed it, billions of dollars in federal military spending. This is from the release:

The military supports 540,000 jobs, including 340,000 in the private sector, according to a new report released today by the N.C. Department of Commerce. The report also found the military boosts the state’s personal income by more than $30 billion.

The study, released by the Labor & Economic Analysis Division, concludes the military accounts for nearly 10 percent of all economic activity in North Carolina.”

Got that? It turns out that the same people who reject and deride the idea of receiving federal money for health care as a matter of accepting “borrowed” money that can’t possibly boost the state’s economy absolutely love the idea when it comes to military spending.

But wait, it gets better. The following section appeared as the bottom of Governor’s press release and in the new military spending report itself:

The economic impact analysis was completed using the Policy Insight Plus (PI+) model licensed by Regional Economic Models Incorporated (REMI).  The model uses data from the Bureau of Economic Analysis, Bureau of Labor Statistics, Census Bureau, Department of Defense, Department of Homeland Security and other public data sources.”

That’s right: It’s the same model for assessing the impact of federal dollars that the administration and its allies utterly reject when it comes to Medicaid dollars!

Predictable hypocrisy

Of course, this latest bit of two-faced behavior on the question of federal money ought to come as no real surprise; McCrory officials regularly celebrate federal funding as creating jobs and stimulating the economy when it suits their ideological and political needs. In recent weeks, McCrory Transportation Secretary Anthony Tata has been especially visible celebrating and promoting an enormous new effort to “fortify” Raleigh’s Interstate 40/440 “Beltline” – a project that will rely upon millions and millions of federal dollars and put droves of construction workers, contractors and material suppliers to work. Funny that no one has ever suggested that North Carolina ought to turn those dollars down because of their unpredictability or the need for matching state appropriations.

Sadly, it appears that when it comes to the collision between selling the McCrory administration agenda and politically inconvenient facts, there is sometimes a distinct shortage of truth-in-advertising from the state’s Salesman-in-Chief.

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